Newsletter – June 2016

Technology is disrupting most areas of life, including white collar jobs

While we are all aware that technology is changing many areas of life, many of us assume it won’t impact our jobs too much. That may be wrong. The disruption of all types of jobs and business models by rapidly advancing technology is becoming more pervasive. Automation of many current jobs is inevitable. This video gives a good sense of how this is happening.https://www.youtube.com/watch?v=7Pq-S557XQU

End of Financial Year Planning

As we approach 30 June it is a good idea to check whether there are any things you should be doing to maximise concessions and tax deductions, including for your Superannuation. Some key things to consider include:

Maximise your use of the available Super concessions now

If you were 49 or older on June 30, 2015, then for this year (and next financial year) you have a cap on your concessional contributions of $35,000. This higher cap will also apply to you from July 1 if you turned 49 this financial year. In all other cases, your concessional cap is slightly lower at $30,000. It’s important to be aware of the concessional contributions going into your super account as chances are that the majority of them have been made by someone else, such as your employer(s).

For the substantially self employed, claim a tax deduction for Super contributions

If you are claiming personal superannuation contributions as an income tax deduction , make sure you qualify. Where you have some employment related income, you need to satisfy what is referred to as the ‘10% rule’ to be eligible to claim a personal superannuation contribution as an income tax deduction. (The removal of the ‘10% rule’ was announced as a proposed change to have effect from 1 July 2017, but still applies for 2015/16 and 2016/17 income years).

Further, for personal contributions claimed as an income tax deduction, the relevant notice of deductibility and acknowledgement by the fund trustee(s) is required. It is important that the correct notice and acknowledgement are provided to substantiate any claim in the event of a review by the ATO, particularly of a member’s personal tax return.

Be aware of the level of contributions you have previously made to super

With immediate effect from budget night, a lifetime cap of $500,000 has been placed on non-concessional (or after tax) contributions. This cap includes any after tax contributions made to your super since July 2007. It’s important to understand how you are placed against this new cap to ensure you don’t inadvertently exceed it.

Free money from the Government (Co-contributions to Super) for low income earners

There aren’t too many handouts from the government – and despite being downsized over the years to only $500, the co-contribution remains one of them. If you have a low-income spouse or partner engaged in employment, or even an adult child working part-time who you wish to assist, you should consider taking advantage of this government benefit. The co-contribution is a contribution by the government to a taxpayer’s super fund (including an SMSF) when the taxpayer makes a personal super contribution that they do not claim as an income tax deduction.

To access the co-contribution the taxpayer’s income must be less than $50,454. The full co-contribution is available if the taxpayer’s income is below $35,454. Between $35,454 and $50,454 the maximum co-contribution is reduced by 3.333 cents for every $1 in excess

At least 10% of the taxpayer’s income must come from employment related activities or carrying on a business (i.e. self-employed). The taxpayer makes a personal (non-deductible) super contribution – the government matches this on a $1 for every $2 made, up to a maximum personal super contribution of $1,000. The taxpayer must be under 71 years of age at the end of the financial year. The maximum co-contribution is $500, which is made when a taxpayer earns less than $35,454 and makes a personal super contribution of $1,000. Income includes assessable income, reportable fringe benefits and reportable employer super contributions (most commonly, salary sacrifice amount).Is the world becoming more dangerous? Dr. Keith Suter, widely known as the International Affairs Expert on Channel Seven’s Sunrise program, recently spoke about the common perception that the world seems an increasingly dangerous place, driven by uncertainty and conflict – from the break-up of Ukraine, to the rise of religious extremism in the Middle East, and the growing economic and political influence of China. Terrorist incidents add to the perception of increasing danger.

The sense of chaos is exacerbated by the mass media which seeks to entertain rather than provide meaningful analysis of global events. Yet on many measures, the world is becoming safer, as the spread of democracy reduces the threat of armed conflict between nations. More than ever, investors need to filter out the noise and keep the focus on the important emerging geo-political developments which are shaping the world.

Brexit: will Britain leave the European Union (Brexit) and does it matter?

On 23 June the British electorate will vote on whether the United Kingdom (England, Scotland & Northern Ireland) should leave the European Union. Withdrawal from the EU is often referred to as Brexit being a combination of the words Britain and exit.

Brexit has the potential to spark major economic and market disruption, at least in the short term. For example, departing from the European Union would force the UK to renegotiate hundreds of treaty agreements on everything from airport landing rights to bank settlements. Currently the polls indicate a very close vote. The UK is one of the developed world’s stronger economies and a win by the “leave” side could stop that trend.

The conventional view has been that Brexit would not have any significant medium to longer term consequences for other countries unless other EU members decided to follow Britain’s lead and progressively the EU broke up. That is possible and there are reports that The Netherlands may opt for a similar referendum if the British exit. There is clearly the potential for foreign exchange and share markets to react strongly to these developments.

This newsletter contains general advice. It does not take into account your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.